Poor retail figures show weakness of US consumer

A slew of sales figures from the biggest retailers in the US yesterday provided a snapshot of the strength of the American consumer – and it was not pretty.

The discount chain Target was among the biggest disappointments, revealing that like-for-like sales growth in September was just 1.2 per cent, below even the revised estimate it had given at the time of a profit warning two weeks ago.

And there were under-par figures across the industry, from upscale department stores to mass-market clothing chains, to the biggest discount retailer of them all, Wal-Mart.

The Thomson Financial Same-Store Sales Index rose 1.4 per cent in September, below the 2.1 per cent estimated by analysts, and sharply lower than last year's 4.2 per cent growth. Investors have been looking for clues as to whether the US consumer, a significant prop to the economy over the past year, may be buckling in the face of slower jobs growth and slumping house prices in many parts of the country.

The September retail sales figures, though, were complicated by the unseasonally warm weather of recent weeks, on which executives blamed sluggish sales of the autumn clothing collections in stores.

Myron Ullman, chief executive of the department store chain JC Penny, cited a combination of factors in his company's profit warning yesterday, and he tried to put a brave face on an unexpected 4.6 per cent decline in same-store sales in September. "While unseasonable weather in large areas of the country and the well-chronicled issues affecting the housing market impacted our sales for the September period, we are encouraged by the fav-ourable response to our fall merchandise assortments in areas experiencing normal temperatures."

Target said its performance had been dragged down by weak clothing sales, and the growth figure of 1.2 per cent compared with a consensus forecast among analysts of 2.2 per cent. The company said it believes its full-year earnings per share will now come in below the mid-point of its previous guidance.

Macy's, the department store chain whose flagship store in New York is the biggest in the world, rep-orted a 2.7 per cent drop in sales, worse than the 1 per cent projected.

Specialist clothing retailers were particularly badly hit. Out-of-fashion Gap rep-orted a 10 per cent sales decline as customers stayed away from its stores. And Abercrombie & Fitch, which recently opened its first outlet in London, revealed a 4 per cent fall in sales, twice as bad as Wall Street had expected.

Joseph Beaulieu, analyst at Morningstar, said: "I'm usually suspicious when companies blame weather, but September was pretty amazingly warm and that really hurt apparel."

Wal-Mart ended as the one bright spot because – although its 1.4 per cent sales growth figure was at the low end of guidance – it said it had driven down costs from suppliers and improved margins. Its shares leapt almost 4 per cent in early trading.